Both letters were addressed to Corrs Chambers Westgarth and they are followed in the defendants' solicitors' bundle by a number of pages of a marked form of lease, clause 7.1 of which is in the form that was utilised at the meeting at Phillips Fox on 20 October 2004 as I have previously recounted, that is to say, paragraphs (a), (b) and (c) are omitted entirely and a new paragraph (i) is inserted referring to a market review of rent on assignment. Each of these pages bears Mr Prendergast's initials in his handwriting which is quite distinctive, as appears from other documents in evidence signed by him. In the absence of evidence from Mr Prendergast to the contrary, the conclusion seems clear that Mr Prendergast personally approved the deletion of the provision for surrender on assignment prior to the meeting of 20 October and that his position at that meeting, on the subject of assignment, was simply that there should be a provision imposing a market review of rent as at the date of an assignment. Such a provision, on the evidence before me, would be unusual, and the plaintiffs, of course, contended that it would not be a normal commercial term. As the email by which the PDF version to the same effect was forwarded to Mr Ireland was sent by John Frangi, solicitor of Corrs Chambers Westgarth on the same day, 12 October 2004, at 6.52pm, I infer that this was the version provided by Mr Prendergast to his solicitors and that he provided it in a PDF version.
16 In these circumstances, the plaintiffs first sought to say an agreement was concluded at or before the meeting of 20 October 2004 that the leases should not contain a surrender on assignment provision such as the defendants had previously put forward. But, in my opinion, it would be artificial in the extreme to seize upon a stage, in the ebb and flow of ideas and drafts between solicitors for opposed clients attempting to settle a mutually satisfactory document, as a moment of contract, notwithstanding that the whole process remained incomplete and the document itself was not accepted by either party.
17 The next argument for the plaintiffs is much more persuasive. They say the provision for surrender on assignment has simply been included by mistake after its deliberate deletion and it should therefore be removed from the settled form of each of the leases. It is quite clear there was a mistake, so far as the plaintiffs were concerned. But the defendants were aware the provision had been included and it is just possible, Virginia Briggs who should surely have appreciated what had occurred being away on accouchement leave, that they thought there might have been a change of mind on the plaintiffs' part. On this basis, can it be said the mistake was only a unilateral mistake of the plaintiffs not falling within the principle of Taylor v Johnson (1983) 151 CLR 422, which would allow relief to the mistaken party if the other party had deliberately set out to ensure the mistake was not discovered? The problem for the plaintiffs on that question would be the absence of evidence of any deliberate action of the kind postulated.
18 But, in my opinion, the first step in an analysis of the problem is to identify the relevant contract which could be affected by mistake. There was, I find, no contract, mistaken or otherwise, concluded at the meeting of 20 October. The parties discussed draft leases, and did not agree upon anything except a further examination of drafts which might lead (as it did) to a referral to the Master, and eventually to an expert. When Henry Davis York forwarded the mistaken draft, did they make an offer capable of acceptance so as to create a contract? In my opinion, for the same reason that led me to reject the idea of a contract to eliminate clause 7.1(a) and (b), I should hold it would be contrary to the normal understanding on which solicitors put forward drafts of documents, where the acceptance of one clause may depend upon the acceptance, rejection or amendment of another, to see Mr Ireland as offering a contract to insert clause 7.1(a) and (b) in the leases. At all events, the terms of his email of 25 October 2004 expressly negative any such notion. It follows that the draft returned to him could not be an acceptance, since there was no offer to accept.
19 Once it is seen that there was no contract to accept a particular form of lease subject only to the resolution of identified outstanding questions, the real area of contractual mistake that may be involved can be examined, and whether a unilateral or a mutual mistake was made can be considered. The one relevant contract now in question was the contract to refer the leases for expert settlement of the disputed clauses. Whether or not what was earlier arranged about that had contractual force, the final agreement, which must be taken to have subsumed or replaced prior arrangements, was the President's Expert Agreement. Clause 2 of that document makes it clear it was concerned with the disputes that had arisen as to the terms of the leases, and clause 3 states that the parties had "agreed to refer" to the expert "such part as remain[ed] unresolved" of their disputes. The submissions each side put to the expert are entirely consistent with this understanding of the contract of referral; they are confined to identified clauses in dispute, whether proposed by the plaintiffs or the defendants.
20 When the matter is looked at in that light, no room remains for regarding it as involving a merely unilateral mistake. On the assumption the defendants perceived no mistake in the plaintiffs' inclusion in their draft of the provision for surrender on assignment (and on any other assumption the plaintiffs must be entitled to relief for a not merely unconscientious but quite dishonest response to Mr Ireland's email: see Tutt v Doyle (1997) 42 NSWLR 10 at 12-13; Medsara Pty Limited v Sande [2005] NSWCA 40 at [4]), both parties mistakenly thought the marked clauses in the draft leases, to which alone they addressed their submissions, included all the clauses on which they had actually disagreed, and that all the unmarked clauses were clauses to which each was prepared to assent. It was not a case of an innocent party accepting an offer by another who was unilaterally mistaken, so as to conclude a contract. Both parties were putting forward to the expert draft documents, which would not be contractual unless and until executed, in the mistaken belief that those documents accurately revealed the area of their dispute.
21 Quite apart from the principles governing a contractual mistake, it seems to me the same result would follow here on the true construction of the President's Expert Agreement. For since only the identified disputes were by it referred to the expert for determination, and no dispute was identified in respect of the surrender on assignment clause, no dispute as to that clause was referred. The true position having become apparent before the execution of any lease, the dispute is yet to be determined, and the Court being seised of the matter pursuant to the order for specific performance, an appropriate ancillary order may be made.
22 Reference to the specific performance order raises yet another basis on which the Court may intervene. It has control of a contract which has been ordered to be specifically performed. The settlement of the form of the leases was therefore originally in the hands of the Master, but it was referred for expert determination by the authority of an order of the Court vacating the reference of that question to the Master. Indeed, it will be recalled that the defendants' solicitors, in their submissions to the expert, informed her it was "pursuant to an order of the Court" the dispute had been referred to her. As in the case of a compromise of an action by agreement of the parties, the matter remains under the control of the Court pursuant to the order under which the Heads of Agreement, including the provision for the execution of the leases, will be performed. That situation makes applicable to the President's Expert Agreement the principle cited by Barrett J in Mohamed v Farah [2004] NSWSC 482. Although it was sufficient for the purposes of that case for his Honour to see the principle as applicable to a compromise, its foundation rests on the Court's control of litigation in order to serve the interests of justice. In this case no less than in that, I hold that the interests of justice in the circumstances require a determination to be made now, as it has not been made yet, of the question which was obscured by the mistake that has occurred.
23 I propose to make an order under Part 72 Rule 2 of the Supreme Court Rules and the transitional provisions of the Civil Procedure Act 2005 referring to Ms Margaret Hole for inquiry and report the question whether each of the leases should contain either of the provisions referred to as the surrender on assignment provision and the market review on assignment provision. It is desirable to utilise the transitional provisions because other questions with respect to the leases are already under consideration by Ms Hole pursuant to the same provisions. If, of course, the defendants choose now to revert to Mr Prendergast's previous decision to opt for one only of the suggested clauses, it will be unnecessary for the inquiry and report to deal with the other, but in the unusual circumstances I have concluded Mr Prendergast should have the opportunity to reconsider that question at this stage.
24 As to costs, the position is somewhat complicated. The order to be made should provide for the plaintiffs to pay any costs of the defendants thrown away by reason of the mistaken inclusion of the surrender on assignment provision in the drafts of the leases from 25 October 2004 until the defendants were advised of the mistake. Those costs should also include the costs of the fresh referral to Ms Hole I am now making which would have been unnecessary but for the error of the plaintiffs' solicitors. However, the defendants should pay the plaintiffs' costs of the motion which the defendants have unsuccessfully resisted.
25 I direct that the plaintiffs bring in, at a time to be fixed, short minutes of orders appropriate to reflect these reasons.